CA-4.1.2
Broadly, the assignment of Risk Weights (RW) under the standardised approach takes into consideration the following:
• The credit risk rating of an obligor or other counterparty, or a security, based on external credit assessment institutions (ECAI) ratings7. In determining the risk weights in the standardised approach, Islamic banks must use assessments by only those external credit assessment institutions which are recognised as eligible for capital purposes by CBB in accordance with the criteria defined in section CA-4.6.
• Credit risk mitigation techniques adopted by the banks;
• Types of the underlying assets that are sold and collateralised or leased by the banks; and
• The amount of specific provisions made for the overdue portion of accounts receivable or lease payments receivable.
7 The notations follow the methodology used by one institution, Standard & Poor's. The use of Standard & Poor's credit ratings is an example only; those of some other external credit assessment institutions could equally well be used. The ratings used throughout this document, therefore, do not express any preferences or determinations on external assessment institutions by CBB.
Amended: April 2011
April 2008
April 2008